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Fraud*According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain*As defined in Wikipedia

Friday, September 9, 2011

The following article is a description of some of the ways that Goldman Sachs earns its huge profits. Gilani discusses Goldman Sachs's relationship with the subprime mortgage market, with AIG and with clients while market-making.

Most of Goldman's money now is made from market-making transactions. Goldman Sachs is declared a criminal enterprise.

Goldman Sachs isn’t the only bank to rip-off its clients and America. But because it is the best at what it does it is the most profitable bank in the world, for now.

Regular, old everyday trading is the key to Goldman’s success.What does that mean? I’m not talking about Goldman’s “big short” and how it bet massively against the subprime mortgage market while simultaneously selling huge quantities of designed-to-fail mortgage securities to its own customers.

And I’m not talking about how Goldman gamed AIG, the largest and certainly biggest too-big-to-fail insurance company in the world, into writing hundreds of billions of dollars of credit default swaps on subprime and AAA-rated mortgage pools for its own benefit. Then with its contracted ability to call on AIG for more collateral in the event of AIG’s downgrade helped to drive AIG’s downgrade and trigger the cash capital calls that sank AIG while (get this) simultaneously profiting on the rising price of the credit default swaps Goldman itself bought on (you guessed it) AIG.

As a former Wall Street executive and hedge fund manager, I’m in awe of the symmetry and elegance of those trades. But that’s not what I’m talking about.

I am talking about what Goldman does every day; its little old trades and how they set them up.

Here’s a good example. Just a couple of days ago Goldman sent out a non-public report to “institutional” clients, namely hedge funds. It was pretty dark. Apparently, its author, Alan Brazil, in the 54 page document said that European banks needed a trillion dollars more capital and that China’s growth miracle was unsustainable among other soothing prognostications.

Mind you, Mr. Brazil isn’t a research analyst walled off from Goldman’s trading desk. He sits on the trading desk where the bank’s customers’ business is transacted on their behalf by Goldman traders who also trade for the benefit of the House, namely, Goldman Sachs.

No doubt, Mr. Brazil was just alerting the bank’s big trading customers of some goings on around the world and offering some help on how they might protect themselves, which he did in the form of suggested trades he’d help them put on. Call it just business as usual.

Of course, Goldman traders, sitting on the trading desks where order flow from customers, clients and countries around the world ends up, would never front-run those orders, nor would they ever use that order flow and all the other order flow from all the other trading venues they have their hands in and on to feed their arbitrage-eating, high frequency trading algorithms. Never.

But, what they can do, legally, as market-makers, is take the other side of any of the trades that come their way. And for that matter, take any side of any trade, or take any side they want in anticipation of any trade they think might come their way in their duties as bona-fide market-makers.

7
COMMENTS:

Anon
said...

Here's how....

Nobody - and I do mean nobody - in our political establishment fromeither party gives a damn about the lies and outright fraud in ourfinancial system. Neither political party, including some veryspecific representatives that have railed about various problems incapital markets, the IMF and similar over the last couple of yearswill even open their damn mouths, say much less demand structuralchanges and an end to the frauds.

EVERY ONE OF THE POLITICIANS ON BOTH SIDES OF THE AISLE - ALL OF THEMWITHOUT EXCEPTION - HAVE LIED, CHEATED AND STOLE FROM YOU TO PROTECT AGANG THAT HAS REPEATEDLY ABUSED LEVERAGE TO ROB YOU BLIND. NOW THEPONZI SCHEME IS COLLAPSING AS WE ARE OUT OF SUCKERS - GLOBALLY - WITHWHICH TO PERPETUATE IT.http://market-ticker.org/akcs-www?singlepost=2703204

Anon, your anger and frustrations are well founded and understandable.

There is more underlying this entire economic crisis then just the mere frauds perpetrated by the banksters with the help and cover of our government.

We, The People, are being manipulated, minimized and controlled by powers that exist that we do not see or hear.

However, there still does exist one power - I believe - to be greater then those in the government who would see us their servants. That power of course is our power to VOTE. We can still determine who - as Obama put it last night - we HIRE to work for us in government.

We can vote out encumbants and all those who have lied to us and continue to lie to us.

We can choose to not vote for those candidtates - as in the Republican debates - that lie to us or attempt to BS us.

We can choose not to vote at all if there is no candidate worthy of voting for. The concept of voting for the "lesser of two evils" is NOT a legitimate reason to vote for someone and put them in a position of power over us.

Anon, both Mike Morgan - our founder - and I have always said, "WAKE UP AMERICA" and you obviously have.

Thank you for stopping by and for taking the time to comment. We need more like you in this country.

"A lot of white-collar criminals are psychopaths," says Bob Hare. "But they flourish because the characteristics that define the disorder are actually valued. When they get caught, what happens? A slap on the wrist, a six-month ban from trading, and don't give us the $100 million back. I've always looked at white-collar crime as being as bad or worse than some of the physically violent crimes that are committed."

The best way to protect the workplace is not to hire psychopaths in the first place. That means training interviewers so they're less likely to be manipulated and conned. It means checking resumés for lies and distortions, and it means following up references.

Paul Babiak says he's "not comfortable" with one researcher's estimate that one in ten executives is a psychopath, but he has noticed that they are attracted to positions of power. When he describes employees such as John to other executives, they know exactly whom he's talking about. "I was talking to a group of human-resources executives yesterday," says Babiak, "and every one of them said, you know, I think I've got somebody like that."

By now, you're probably thinking the same thing. The number of psychopaths in society is about the same as the number of schizophrenics, but unlike schizophrenics, psychopaths aren't loners. That means most of us have met or will meet one.

My few occasions to interact with Washington K Street lobbyists have found them in a rapid growth industry, regardless of the political tides. Obama startled everyone by raising $750mil to run for his first presidential term. He plans to raise $1B for his second run. The Supreme Court on a divided decision opened the flood gates for unlimited anonymous corporate contributions. Presumably shareholders expect to get their money’s worth.

Solutions are disclosure and/or regulation. But in the first instance, politicians must go contrary to their best instincts for self-preservation and reject the attraction of money. It could first be done by Pres. Obama rejecting all contributions while saying to the country, “you know me and I’m too busy running the country to run for office. If you like what I’m doing, you will re-elect me.”

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The men the American people admire most extravagantly are the greatest liars; the men they detest most violently are those who try to tell them the truth. … H.L. Mencken

An age is called Dark not because the light fails to shine, but because people refuse to see it…James Albert Michener, novelist (1907-1997)

It is impossible to calculate the moral mischief, if I may so express it, that mental lying has produced in society. When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe he has prepared himself for the commission of every other crime. … Thomas Paine 1737-1809, Anglo-American Political Theorist, Writer

Laws just or unjust may govern mens actions. Tyrannies may restrain or regulate their words. The machinery of propaganda may pack their minds with falsehood and deny them truth for many generations of time. But the soul of man thus held in trance or frozen in a long night can be awakened by a spark coming from God knows where and in a moment the whole structure of lies and oppression is on trial for its life.: Sir Winston ChurchillWhen governments fear the people, there is liberty. When the people fear the government, there is tyranny. - Thomas Jefferson

When cheaters prosper, we end up with the worst possible system and to call it a free market system is an obscenity. -William BlackWhen the people fear their government, there is tyranny; when the government fears the people, there is liberty." - Thomas JeffersonI believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property - until their children wake-up homeless on the continent their fathers conquered. Thomas Jefferson - 1802

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